More Articles

The Dispatch E-Edition

All current subscribers have full access to Digital D, which includes the E-Edition and
unlimited premium content on Dispatch.com, BuckeyeXtra.com, BlueJacketsXtra.com and
DispatchPolitics.com.
Subscribe
today!

WASHINGTON — Nearly half of the mortgages modified in 2009 under the Obama administration’s
signature homeowner rescue effort are in default again, according to a report today that raised
concerns about the program’s effectiveness.

The report from the Special Inspector General for the Troubled Asset Relief Program, the
watchdog for the aid effort, said 46 percent of the struggling homeowners who received loan
modifications in 2009 under the Home Affordable Modification Program had redefaulted.

The Obama administration launched HAMP in 2009 to aid struggling homeowners impacted by the
housing boom and bust. The program, extended in May by two years to help more struggling borrowers
keep their homes, draws from the Treasury Department’s financial bailout fund and pays lenders and
servicers to rewrite loan terms for borrowers who can’t make their current mortgage payments.

“This is a program where there’s not enough people being helped,” Christy Romero, special
inspector general for SIGTARP, told Reuters. “Ultimately, the Treasury needs to make good on its
promise that TARP is not just a bailout for the largest financial institutions but it will also
help bail out homeowners.”

While HAMP has helped about 865,100 homeowners avoid foreclosure over the lifetime of the
program through permanent loan modifications, more than 306,000 homeowners had redefaulted on their
modified mortgages as of the end of April, the report stated.

According to the inspector general, of the 865,100 homeowners in an active permanent HAMP
modification, about 10 percent have missed one or two monthly mortgage payments and are at risk of
continuing the default trend.

The administration has refined the HAMP program since its inception to broaden its reach,
including by expanding eligibility and increasing payments to mortgage companies that lower
borrowers’ monthly payments. When it was unveiled, the administration estimated that the
foreclosure prevention program would offer a lifeline to as many as 4 million homeowners.

The inspector general urged the Treasury to try to determine why borrowers were going off
track and said it should require mortgage servicers to look for early warning signals.

“Exactly why people are falling out of HAMP isn’t well understood by Treasury,” said Romero. “
If redefaults are happening at an alarming rate, then you’ve got to stop that and change the
program somehow where you stop the trend.”

“There will always be an inherent risk of homeowner redefault rate in a program like this
given the very difficult circumstances that people who need modifications face,” the official said.
“The longer they are in there, the less likely they are to redefault.”

The Treasury has set aside $38.5 billion of its TARP funds to pay for the program, but of
that amount it has only spent $8.6 billion, or 22 percent.